A "One-Two Punch" to Innovation? The Most Favored Nation Order and Broader US Drug Pricing Reform

Drug pricing reform is a complex undertaking, and developments related to the recent Most Favored Nation (MFN) executive order give insight into how the initiative may fit into broader drug pricing reform in the US. This was the basis of discussion at a webinar hosted by MJH Life Sciences^® titled “Most Favored Nation Order: Legal Battles, Market Shifts, and the Future of Drug Pricing Reform.”

The MFN executive order, which aims to reduce drug prices in the US to align with what other developed countries pay for the same medications, was introduced in May 2025 by President Donald J. Trump.¹ More recently, the order was advanced via a voluntary agreement with Pfizer to bring the company’s prices down in closer alignment to those in other wealthy nations, with savings averaging 50% and up to 85%.² When the deal with Pfizer was announced, so was the TrumpRx government website, which will allow Americans to buy medications directly from pharmaceutical companies at substantial discounts starting in 2026.

However, the MFN order faces legal and procedural barriers, as panelists discussed during the second of 3 webinars discussing the MFN order. A panel of legal, policy, and industry experts convened for the event:

• Moderator Ron Lanton, JD, of Lanton Law
• Mel Whittington, PhD, managing director and head of the Leerink Center for Pharmacoeconomics at MEDACorp
• Stephen Forster, JD, partner at the Health Care and Life Sciences Practice at Jones Day
• Peter Rubin, executive director of No Patient Left Behind

The group began with a discussion of the landmark agreement with Pfizer, which Lanton noted is a significant development considering the order was introduced just a few months ago. As part of the agreement, the company was also granted a 3-year grace period to avoid tariffs on drugs manufactured outside of the US.² 

“I think it shows you how big and valuable the biopharmaceutical innovation ecosystem is, and that countries should want biopharmaceutical innovation investment and development in their nation for a variety of macroeconomic factors, like jobs, infrastructure, et cetera, but also for health reasons: access to the drugs that end up getting marketed, access to clinical trials, things like that,” Whittington said.

Leaning on Voluntary—or Not-so-Voluntary—Agreements

Notably, the agreement with Pfizer is voluntary, and the overall approach hinges on voluntary changes and pressure from new tariffs, Lanton explained. This marks a different approach than previous efforts to reduce drug prices in the US, but Forster joked that the term “voluntary” warrants quotation marks because there are significant consequences for companies that do not come to agreements to adjust pricing.

Forster also called back to Trump’s 2020 effort to push an interim final rule that was blocked but would have implemented the MFN model to lower Medicare Part B drug prices, which was an attempt to formally implement the strategy. The executive order was similar, although limited to Medicare Part B, but the new MFN order’s approach is less formal and more broad. 

“What we've seen, what I’d say was the difference, is we tried the process,” Forster said. “We knew it was going to be long-winded. We didn't go through that process, ultimately lost in litigation, and now what we have is what some are saying is coercive and kind of chaotic—‘We're going to keep coming after you on these different vehicles.’ I think the takeaway here is the difference, primarily, is we've gone from just Part B to across the board.” He views the use of tariffs as consistent with current efforts to reshore manufacturing. “At this point in time, they are using all available levers to try to proceed with getting Most Favored Nations pricing in place,” he said.

As far as the measures improving patient access to medications, Rubin is skeptical, noting that the MFN strategy might not have the intended effect. In fact, from his perspective, price control strategies from foreign countries would be dangerous for America’s bioeconomy and patient access.

“The US private market system, for all its flaws, ensures that the majority of patients across every market has access to the latest, innovative medicines,” Rubin said. “It also ensures that the US has a world leading bioeconomy.” He noted that because the system rewards the high risk needed to develop cutting-edge treatments, more of these treatments are available to Americans compared with other countries. To make medicines more affordable for Americans, solutions must be tailored to the US system, not imported, he said. The rationale is that if the price controls from foreign countries are adopted, so will be the access restrictions and declining biopharma innovator competitiveness that the US has yet to see.

MFN and Broader Drug Pricing Reform

In the context of broader drug reform efforts, especially the Inflation Reduction Act (IRA), the MFN serves as a “one-two punch” that may be especially detrimental to new oncology research and development, Rubin said. In practice, manufacturers or innovators in countries outside of the US have prices set by the governments, with very little room to negotiate. Therefore, Rubin explained, the only way to comply with MFN is to lower US prices arbitrarily.

“That does not necessarily reflect the ability to bring incentives needed to bring drugs to market over time, particularly thinking about a portfolio of drugs of which 99 out of 100 fail,” Rubin said. He reiterated that this is particularly worrisome in the oncology space, where the MFN and IRA tactics may result in fewer breakthrough therapies. Forster added that as of now, it is not clear how the various drug price reduction strategies will interplay.

Forster also explained that there is no specific legal authority saying that manufacturers must lower prices, and the Trump Administration does not seem to want to skirt this issue, but rather garner quicker results.

“When I look at this particular executive order and what the administration is doing, I don't know that it necessarily seeks to circumvent the issue that there's no specific legal authority to do it. It seems—it appears to me, as my opinion alone—that the use of tariffs is a more immediate and more efficient model to apply pressure to seek the result that they're seeking.”

Formal rulemaking takes time, he said, but tariffs can be implemented readily. And if they are, they can have significant, even “catastrophic” impacts, depending on the size of the manufacturer and what the implementation looks like. Although the administration’s focus is large manufacturers, the order is not limited to manufacturers of any specific size.

In response to a question about the challenges created by an international reference pricing system, Whittington noted that drug pricing in any country is not transparent at all. The significant heterogeneity and confidentiality around pricing, and the country-specific models, are key issues.

“Not only are drugs more expensive in the US, the surgeries are more expensive in the US,” Whittington said. “The other health system costs are included in those economic models, and so you could come out with a very different cost-effectiveness finding between countries, even if you have the drug priced the same. Separately, and maybe more importantly, the interpretation of value or of efficiency differs by country.”

Some countries have explicit cost-effectiveness thresholds, Whittington explained, and they are typically lower than cost-effectiveness thresholds in the US. Therefore, importing pricing from other countries is also importing how those countries value health gains or system efficiencies. Direct-to-consumer platforms such as TrumpRx could potentially increase transparency a bit, Whittington said, although the net price for a commercial payer would still be opaque.

How Will the System Adapt to Reduced Drug Prices?

Reduced prices will typically lead to finding a drug more cost-effective, but Whittington noted that cost-effectiveness analyses do not typically consider price dynamics, which do change cost-effectiveness over time. She also emphasized that drug prices are not just prices but incentives for investors and developers to bring a drug to market. Thinking about pipeline products is crucial in the conversation around pricing, which would also impact revenue and the incentives to bring drugs to market.

“The US market is actually working fairly well to do a sort of forward-looking assessment of how much a drug is worth vs that retrospective perspective that you see academics look at in terms of, ‘Here's how the IRA has impacted innovation,’ and they just omit that ability to think, ‘Well, what are the forward-looking decisions that investors and small biopharmas are making today toward the future?’ and not, ‘How did this impact overall revenues across all pills, all shots, brand and generic medicines over the last 10 years?’” Rubin said.

Key players such as pharmacy benefit managers (PBMs), insurers, and hospitals will also need to adapt. Rubin noted that private health plans are key to bending the cost curve over time in the US health system, since most health care costs are related to providers, hospitals, and other acute care costs that are not drugs.

With legal challenges still underway, it is unclear how the situation will unfold, Forster said. However, one important note is that there is no control over commercial plans that conduct their own negotiations. Still, when it comes down to it, the strategies employed by the Trump Administration are poised to impact the entire health care ecosystem in the US, Rubin said.

“The big takeaway from the legal side is we may not like the tactics that are being employed, and we may not necessarily agree with where things are going, but what seems somewhat clear is that the administration is pulling on all levers that are available to it in an effort to implement most favored nation pricing,” Forster concluded.

References

1. Bonavitacola J. Trump executive order could reduce pharmaceutical costs by 59%. AJMC^®. May 12, 2025. Accessed October 9, 2025. https://www.ajmc.com/view/trump-executive-order-could-reduce-pharmaceutical-costs-by-59-

2. Joszt L. White House, Pfizer reach agreement on drug discounts; Trump announces TrumpRx. AJMC. September 30, 2025. Accessed October 9, 2025. https://www.ajmc.com/view/white-house-pfizer-reach-agreement-on-drug-discounts-trump-announces-trumprx